CEO Interview: Roman Vik, Smartwings
Prague-based Smartwings is part of the Smartwings Group and the largest carrier in the Czech Republic. The LCC operates scheduled, charter and private flights with a fleet of 40 Boeing 737s across the Czech Republic, the Slovak Republic, Poland, Hungary and Germany. Most flights are operated via codeshare with CSA Czech Air-lines, another Smartwings Group airline, which operates two Airbus A320s.
How is Smartwings performing? Restarting the business has been very difficult. Today we have about 80% of our capacity back, with 35 aircraft in service. Because of the COVID-19 crisis, we had to lay off 1,100 employees as part of cost cuts and we also made big savings via talks with lessors GECAS and AerCap, which helped us reach our cost-cutting goals. But the Czech government did not help us. We will see what happens this winter and hopefully September and October will be good, but I’m not very optimistic for our winter operations. Hopefully in two to three years it will be better.
Why has the Czech government not provided any aid to its airlines? You have to ask the government that question. Keep in mind there are elections in September. It is a very difficult situation for airlines. I would hope the European Union would en-sure aid is available to all EU airlines on an equal basis. I find it impossible to accept that support is there for airlines like Air France or Lufthansa when others get no help. We have more than 40 aircraft and each aircraft costs me $50,000 each day, plus headquarters costs. We were mostly grounded for nearly 15 months but received no state aid. Lufthansa is now a state-owned airline. And to work against a competitor with state money is not fair, in my opinion. Now we also have competition from [Lufthansa LCC subsidiary] Eurowings, which has formed a base in Prague.
How would you describe Smartwings’ business strategy and do you have the fleet size you need? We operate all over Europe and across the business sectors: charter, wet-lease, scheduled flights. Is a 42-aircraft fleet the critical size to survive? It's hard to say, but we've survived until now without help. It may be that we will find a strategic partner. In terms of our fleet, we now also have seven Boeing 737 MAXs in operation and we are in talks with Boeing about more possible orders. But that will depend on how the autumn and winter seasons develop and we can't say yet when business will return to pre-crisis levels.
Where are your main concerns for traffic recovery? The holiday/leisure traffic is coming back relatively quickly. But there are still problems with the recovery of regular, scheduled flights between big cities. A lot of people are still not traveling on those routes, partly because these are business routes and companies have changed their corporate travel strategy and are relying more on video conferencing. Long-haul traffic is another area that is very dependent on business travelers and it is hard to say when it will come back. I’m more pessimistic for long-haul operations. Ultimately, I hope the airline business will return to growth, but not if the European Parliament kills us with taxation and penalties.
What is the outlook for CSA Czech Airlines? There is now more clarity and the carrier will not go into bankruptcy. It will go into a reorganization process, which means CSA keeps its presence in Prague. A court had decided it can continue to operate. Smartwings operates 40 Boeing 737s, while CSA operates only two Airbus A320s. We are in talks with Airbus about how we continue.
Why has it always been so difficult for CSA to be profitable? That is easy to explain: The Czech Republic is a small market. I absolutely understand that. Other airlines can eat into the market. You can travel from Prague to Dresden and use Lufthansa or Eurowings, or Lufthansa´s feeder traffic from Prague to Munich. In the future, European airlines will have to fly to more expensive places in the summer to survive the winter. For Smartwings, that means transferring some of our aircraft to Canada and especially to the US in winter, operating charter flights to the Caribbean for example. Some of our aircraft also operate from the Middle East. Flexibility is our greatest strength.